Good afternoon. My name is Zeda and I will be your conference operator today. I would like to welcome everyone to the Aptose Biosciences Conference Call for the Second Quarter Ended June 30, 2023. At this time, all participants are in listen-only mode. After the speakers’ remarks, there will be a Q&A session. [Operator Instructions] Thank you.

As a reminder, this conference call may be recorded. I would now like to introduce Ms. Susan Pietropaolo. Please go ahead..

Thank you, Jada. Good afternoon, and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the second quarter ended June 30, 2023. Earlier today, Aptose issued a press release relating to these financial results. The news release as well as related SEC filings are accessible on Aptose's website.

Joining me on today's call are Dr. William G. Rice, Chairman, President and CEO; Dr. Rafael Bejar, Senior Vice President and Chief Medical Officer; and Mr. Fletcher Payne, Senior Vice President and Chief Financial Officer.

Before we proceed, I would like to remind everyone that certain statements made during this call will include forward-looking statements within the meaning of U.S. and Canadian securities laws. Forward-looking statements reflect Aptose's current expectations regarding future events.

They are not guarantees of performance, and it is possible that actual results and performance could differ materially from these stated expectations. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, performance and achievement to differ materially from those expressed.

To learn more about these risks and uncertainties, please read the risk factors set forth in Aptose's most recent annual report on Form 10-K and SEC and SEDAR filings. All forward-looking statements made during this call speak only as of the date they are made.

Aptose undertakes no obligation to revise or update the statements to reflect events or circumstances after the date of this call, except as required by law. We encourage you to refer to today's press release and the 10-Q for additional information and disclosures regarding today's announcement. I will now turn the call over to Dr.

Rice, Chairman, President and CEO of Aptose Biosciences. Dr.

Rice?.

Thank you, Susan. I want to welcome everyone to our call for the second quarter ended June 30, 2023. You likely have noticed that we've been relatively quiet since our last call but there's been a lot going on behind the scenes since our last call in June. And today, we're happy to provide some important updates.

I'll also point out that many of the details related to today's comments on this call are provided in the accompanying press release and 10-Q that were filed earlier. I want to begin today with speaking about financing activities.

Earlier this year, we had the opportunity to raise capital with the financing, what I'll refer to as flavor of the day, which would have included extensive warrant coverage and would have been extraordinarily dilutive to our team and to our existing investors.

At that time, we chose not to execute such a financing, but rather to activate and at the market or ATM facility and to establish a committed equity facility now there of which would involve warrants. Plus, we told our Board that we would seek partnership investments.

So today, we're delighted to highlight our most recent news regarding our esteemed partner, Hanmi Pharmaceutical of South Korea from whom we licensed Tuspetinib about 1.5 years ago. Today, we announced that Hanmi committed to purchase Aptose equity up to a total ownership of 19.99% over 2 tranches and up to a limit of $7 million.

We're delighted to strengthen our relationship with Hanmi, which reflects the recognition of the growing value of Tuspetinib as a unique treatment for AML and possibly MDS and the significant progress at Aptose is made with Tuspetinib's clinical development. We thank the Hanmi team and in particular, Ms.

Lim, President of Hanmi Pharmaceutical for her leadership and her commitment to Aptose. Our CFO, Mr. Fletcher Payne, will provide a more detailed financial update later in our presentation today.

But I want to point out that in addition to the Hanmi investment, during the quarter, we did activate an ATM facility, and we did enter into a $25 million committed equity facility with Keystone Capital.

We're pleased to have secured these financing instruments as promised, although to date, we have only used the ATM and committed equity facility to a limited capacity and in situations when we believe they would not have a material impact on the trading of stock.

In addition to these financing activities, we also continue to pursue and evaluate partnering activities that may provide strategic support for our programs. It's fair to say the interest in our key clinical asset, Tuspetinib continues to grow, and we continue to engage in productive discussions.

Ultimately, we expect that a global reach will be required to realize the full impact of Tuspetinib at the patient level and the full commercial value of Tuspetinib, so we continue to take steps with the clinical development plan and with partnering discussions to achieve that global reach for Tuspetinib.

Another highlight of the second quarter was a successful End of Phase I meeting with the U.S. FDA for Tuspetinib. We completed an extensive dose escalation and dose exploration trial with Tuspetinib in accordance with the guidance of the FDA's Project Optimus, and we did present our findings to the FDA.

We were pleased with the outcome of the End of Phase I meeting, and it dovetailed perfectly with our ongoing APTIVATE expansion trial in which highly treatment experienced relapsed or refractory AML patients are being dosed with Tuspetinib as a monotherapy or in combination with Venetoclax. In a few minutes, our Chief Medical Officer and resident Dr.

Rafael Bejar, will provide an overview of our recent findings with Tuspetinib, including takeaway messages from our End of Phase I meeting with the FDA. But before he does so, I want to emphasize that we are data-driven as an organization.

And since the last earnings call, we've been quietly gathering information from published research, from our collection of KOLs, from our internal KOL, Dr. Bejar and from our clinical trials to understand the emerging needs of AML patients.

It's essential for us to understand what AML patients truly will need in the future and how we best apply Tuspetinib to those needs. Aptose benefits from having some of the most respected hematology minds as our investigators on our Scientific Advisory Board and on our Hematology Clinical Advisory Board. Our KOLs include [Dr. Novel Dover ], Dr.

Courtney DiNardo , Dr. Michael Andre, Dr. Brian Druker, Dr. Sasha Pearl] and other hematology-focused KOLs from numerous sites in the U.S., Europe, the U.K., Australia and other regions. And our KOLs at a recent meeting of our advisory board, providing us with insights, emerging trends and patient needs that are not yet available through publications.

Leaning from the guidance of these thought leaders, we see several scenarios in which we believe Tuspetinib could improve upon the standard of care for AML patients currently imperfectly being served by therapies.

It's becoming clear that one of the greatest needs is for the superior combination therapies with targeted agents in frontline newly diagnosed AML patients to reduce toxicities, to boost response rates and to deliver greater durations of response without relapses.

Doublet therapy with Venetoclax and hypomethylating agents, or HMAs can deliver 60% to 70% response rates in frontline, unfit patients and there is a desire to move the highly effective and less toxic therapies into more fit patients and move away from intensive chemotherapy.

But to effectively treat a breadth of frontline AML patients with cocktails of targeted agents the cocktails must be even more effective.

Toward that end, triplet therapy of Venetoclax and HMAs, coupled with an anti-proliferative drug has been explored recently in frontline AML patients, and this triple cocktail of targeted agents delivered a remarkable near 100% response rate. While this is encouraging, the anti-proliferative drugs used in that study were FLT3 inhibitors.

Unfortunately, the FLT3 inhibitors used in that study were associated with prolonged myelosuppression, QTc prolongations and are applicable only to approximately 30% of the AML population, those with a mutation in FLT3.

The need in triplet therapy is for a superior anti-proliferative agent that is once daily, can be taken orally with Venetoclax, causes less myelosuppression and avoids QTc prolongation with long-term dosing and can serve not only the FLT3 mutated population, but also the remaining 70% of the AML population with unmutated FLT3.

These characteristics described Tuspetinib, and we want to drive Tuspetinib through doublet combination studies with Venetoclax on the way to triplet therapy in frontline AML. Dr. Dauber is a leader in triplet therapy for AML patients, and we will leverage his expertise to apply Tuspetinib to the triplet therapy approach in our future trials.

Separately, there is a need for superior maintenance therapies that are convenient to take orally that are well tolerated in the non-myelosuppressive that can protect from relapse and extended disease-free survival and that can serve AML patients with mutated and wild type FLT3 as well as patients with mutations in TP53, RAS, NPM1, MLL and other adverse genes.

Again, those needs in maintenance therapy precisely correspond with Tuspetinib properties, and we want to drive Tuspetinib toward maintenance therapy as rapidly as possible, although such an approval would most likely follow initial approvals for doublet and triplet therapies with Tuspetinib.

While we believe Tuspetinib can be applied effectively to triplet therapy and maintenance therapy in the future, let's talk about the here and now. I want to underscore the greatest emerging need, and that is to effectively treat AML patients who already have failed treatment with Venetoclax.

The vast majority of US-based AML patients entering clinical trials now have tried and been failed by Venetoclax at some point. In fact, Venetoclax is so commonly used. It's jokingly referred to as vitamin D.

Regrettably, prior therapy with and failure of Venetoclax leaves patients with very high-risk biology with broadly resistant mutation patterns and with dismal response rate to salvage therapy and with CR rates in the single digits, whether treated with various monotherapy or drug combinations as salvage therapy.

Indeed, we see from our APTIVATE expansion trial that the lion's share of patients entering the study have wild-type unmutated FLT3 and have failed prior therapy with Venetoclax. There is a clear medical need.

Remarkably, our preliminary data from the APTIVATE trial in patients treated with the combination of Tuspetinib and Venetoclax or TUS/VEN, as we refer to it, showed that doublet has been well tolerated and that a significant response rate has been observed in patients who already have failed Venetoclax, thereby potentially expanding the pool of patients that may be responsive to Venetoclax.

Dr. Bejar will provide additional color regarding our preliminary findings with the TUS/VEN drug combination, but these data are generating excitement among our team and the investigators as reflected in a very brisk enrollment rate.

During the coming months of August, September and October, we plan to place as many patients as possible on the TUS/VEN doublet to collect data to demonstrate the doublet is active in patients who have prior Venetoclax failure with mutated and unmutated FLT3, to meet and share preliminary data with bankers, analysts, investors and potential partners to show how we can position Tuspetinib for frontline triplet therapy and maintenance therapy and to move Tuspetinib and Aptose on a clear path towards success.

Now as for Luxeptinib or LUX as we call it, we currently have continuous dosing ongoing in the clinical setting with the 200-milligram dose of the G3 formulation and we will have more definitive comments about LUX with the G3 formulation in the coming weeks. And finally, I'm certain you wish to know about upcoming milestones.

I'll remind you that we may provide updates during earnings calls and medical conferences, but also at any time, we see necessary or consider information as material. Because the upcoming milestones are linked to clinical data, I'll ask Dr. Bejar to outline the milestones after he provides a clinical update. With that, let me now hand it over to Dr.

Bejar, our Chief Medical Officer, to go over more detail about the APTIVATE clinical trial of Tuspetinib and AML and to go over our clinical plans and time lines with you. He also will be available to answer questions.

Raf?.

Thanks, Bill. Let me start by giving you some background on Tuspetinib. This molecule, which suppresses a handful of kinases that drive several key oncogenic pathways was created as a once-daily, oral myeloid kinase inhibitor to treat patients with AML.

By targeting all forms of FLT3, the SYK-kinase, JAK 1 and 2, RSK 1 and 2 and mutant forms but not wild-type forms, KIT and even TEC 1 and TAV 1, suspend can suppress in multiple oncogenic pathways that often lead to disease progression and relapse.

Yet importantly, Tuspetinib also maintains a highly favorable safety profile with no persistent myelosuppression with prolonged dosing. Tuspetinib's noteworthy safety profile is a major differentiating factor relative to other AML drugs.

And as I've said before, the importance of the superior safety profile cannot be underestimated in this vulnerable patient population. As Dr.

Rice mentioned earlier, we held a successful End of Phase II meeting with the FDA for Tuspetinib after completing an extensive dose escalation and dose exploration trial with over 75 patients, we presented our findings to the FDA.

After review of the data, an 80-milligram once daily dose was selected as the recommended Phase II dose for monotherapy treatment of AML patients with Tuspetinib.

In addition, the FDA confirmed that all development paths with Tuspetinib were opening remain open including the single-arm accelerated path and that no special QTc or metabolite monitoring studies were going to be required. And by the way, the 80-milligram dose level is now being used as monotherapy and in combination with Venetoclax.

Following completion of the successful dose escalation and dose exploration Phase I/II trial Tuspetinib in 77 refractory AML patients, we initiated the APTIVATE Phase I/II extension trial with Tuspetinib as a monotherapy or as a doublet therapy in relapsed or refractory AML patients.

I'm happy to talk about what we're seeing in the APTIVATE trial with Tuspetinib and where that information is leading us from a clinical development perspective. As you know, in the APTIVATE expansion trial, we have 2 arms, a monotherapy cohort and a combination therapy arm where Tuspetinib is being administered with Venetoclax.

This is a global trial and our clinical team now has numerous sites up and running across the globe, including sites in U.S., Korea, Australia, in the U.K. and in Europe. During EHA in June, we provided a very preliminary highlight of the APTIVATE expansion trial that we had initiated in the first quarter this year.

We highlighted brisk enrollment, and we already have noted anti-leukemic activity, including a complete response in our doublet TUS/VEN arm in a patient that had already failed Venetoclax treatment.

Enrollment continues to be brisk as we further expand our study internationally with newly activated sites in Australia and Spain in additional countries poised to begin enrolling soon. As of August 1, 2023, we had enrolled 29 relapsed/refractory AML patients in the APTIVATE study. 14 in the test monotherapy arm, 17 in the TUS/VEN doublet arm.

As of that date, 7 patients in the monotherapy arm reached efficacy evaluable stage, and there was 1 response in the patients that previously had been treated with Venetoclax.

A number of the patients on the monotherapy arm who progressed quickly had failed prior Venetoclax therapy and were less responsive to test monotherapy, a pattern we also observed in earlier cohorts.

In contrast, 10 out the 17 patients on the TUS/VEN doublet arm had already reached the efficacy value stage, meaning they had received sufficient therapy and had undergone appropriate response assessments in the doublet arm.

We're very pleased with our findings in the TUS/VEN double arm, and I want to walk you through some of these preliminary findings now.

Although, may have shown a little bit of my thunder here and with appropriate cautionary comments, we report today that out of our 10 evaluable patients on the TUS/VEN doublet thus far, we've seen a complete -- a composite complete response rate of CRc of 50%.

This is defined as a combination of complete remissions, complete remissions with incomplete hematologic recovery or platelet recovery or partial hematologic recovery. And the CRis in this study are inclusive of the morphologic leukemia restate. These responses were all in a very ill relapsed refractory AML population.

9 out of the 10 evaluable patients had failed prior Venetoclax treatments, with 4 of the 9 achieving responses. This yields an overall response rate of 44% among patients with prior Venetoclax failure.

Recent publications and investigator conversations have highlighted that patients who fail Venetoclax often acquire or expand resistant clones that are highly refractory to salvage therapy. Considering the scarcity of salvage therapies to effectively treat this prior Venetoclax failure population, we were excited to see these positive results.

And these data point is towards a registrational trial with our TUS/VEN doublet therapy in this growing prior Venetoclax failure population that is in desperate need of effective salvage therapies.

Also, among the 10 evaluable patients who received TUS/VEN doublet, 3 responses emerge among 7 patients with unmutated FLT3 for an overall 43% response rate. Patients with unmutated FLT3 account for approximately 70% of the AML population, yet there are a few treatment options and little in development for this patient population.

The ability of Tuspetinib to treat patients with unmutated FLT3 significantly extends the market potential for this drug. And this is an important differentiating feature of Tuspetinib.

In addition, while there were few FLT3-mutated patients in the TUS/VEN doublet trial to date, we observed responses in 2 of the 3 evaluable patients for an overall response rate of 67%, albeit small numbers.

One of the responders [inaudible] FLT3 ITD mutation and the other [inaudible] mutation in the tyrosine kinase domain, again, highlighting the broad activity of this drug against mutants forms of three.

Thus far, we have treated one evaluable patient in the TUS/VEN doublet trial with a highly adverse mutation in the TP53 gene and we observed a response in this patient, albeit with very small numbers, the numbers are trending in the right direction. All of these patients have a great unmet medical need.

And as we have mentioned before, the ability to rescue these patients may allow us a quicker and clearer path to registration than even a monotherapy trial might. Another differentiator is to spade in favorable safety and tolerability profile, even the test can double to date.

Spaded may well prove to be an ideal therapeutic to combine with Venetoclax, a noteworthy drug that can have its own side effects that could limit its prolonged use.

I mentioned in our last call that the APTIVATE study represents an attractive treatment option for patients and their physicians, leading them to enroll earlier in the course of treatment and increasing the likelihood of achieving a meaningful clinical benefit.

As a result, enrollment has been brisk during the first half of 2023, and this continues with rapid enrollment as we have become more heavily focused on accrual of patients who are TUS/VEN doublet. Several factors drove the decision to focus more heavily on the TUS/VEN doublet.

First, we know that TUS/VEN has a highly favorable safety profile and as convenient as a once-daily tablet. And second, Tuspetinib combined synergistically in preclinical in vivo models of AML.

In addition, in vitro drug-resistant induction studies indicate that Tuspetinib drug resistance creates synthetic lethality for Venetoclax in AML cells, supporting idea to spent as an ideal drug partner for combination therapy.

Furthermore, the advisers and their advisory board see a rapidly emerging need in an AML patients treated with Venetoclax because once they fail this drug, they become highly refractory to salvage therapy.

Our TUS/VEN doublet data are still maturing but they suggest doublet can deliver meaningful responses in this very difficult to treat prior Venetoclax exposed AML population.

Because Tuspetinib has shown activity against a broad range of AML highly adverse mutations, including patients with unmutated FLT3, mutated FLT3, mutated TP53, mutated RAS and mutated MLL, we believe that TUS/VEN doublet can serve this broad population after failure of Venetoclax. Again, both in FLT3 mutated and unmutated patients.

This highlights the breadth of activity illustrating TUS is much more than a FLT3 inhibitor. Data from the TUS/VEN doublet guide us toward TUS/VEN randomized registrational trial in patients with second or third-line AML with prior Venetoclax failure, who have exhausted their approved therapeutic options, if any, are available.

This trial may be powered for an early assessment to deliver an accelerated approval while being continued for full approval upon maturity of the data. This would serve the needs of a significant AML population.

It would provide potential partners with data to build their commercial models, recognizing the value of TUS/VEN and is the type of trial was recommended by Dr. Daver in our Clinical Advisory Board.

In addition, collection of data with a TUS/VEN doublet can provide the needed understanding to apply Tuspetinib as part of a TUS/VEN/HMA triplet study in frontline AML patients. We know that paradigm for treating AML is quickly shifting towards doublet and triple combination therapies as our lead investigator, Dr.

Daver and his team at MD Anderson have recently published achieving great success in combination therapies, limited only by some of the additional toxicities that are brought into the mix by each of these agents.

The addition of Tuspetinib with its strong safety profile, to the VEN/HMA doublet is a vision to create a triplet that can be applied broadly to AML patients with mutated or unmutated FLT3, not merely the 30% at carry-through mutation and diagnosis and it can be done without the addition of cardiotoxicity and following mylosuppression that can be caused by competing agents.

So now let's briefly talk about Tuspetinib as monotherapy. During our recently completed dose escalation and dose expansion Phase I/II trial, Tuspetinib monotherapy has delivered multiple responses across 4 dose levels with no DLTs in mutationally diverse and difficult-to-treat relapsed/ refractory AML population.

The totality of suspected monotherapy data emerging from our dose escalation and exploration trial as well as from our APTIVATE trial to date and includes the patient with the CRc. I talked a lot about the single agent activity of Tuspetinib.

It is clearly active across a broad range of AML genotypes, including both with mutated and unmutated disease and even in the presence of other adverse mutations such as those in the RAS pathway and TP53.

We've also learned that later line activity and activity in patients previously treated with Venetoclax is less impressive as one might expect for any therapy.

Since our study began, more and more AML patients are being treated with Venetoclax in the frontline and in first or second salvage setting off-label, even when other approved therapies are available.

Therefore, we will focus our ongoing efforts in AML on the combination of Tuspetinib with Venetoclax, where we have already seen clear activity even in Venetoclax pretreated patients.

As we proceed through the second half of 2023, we plan to test Tuspetinib in patients with MDS, as a number of AML patients with unmutated FLT3 and MDS like genetic features have responded well to Tuspetinib. This would include treatment with Tuspetinib monotherapy as well as in combination with Venetoclax.

We will have a lot more on MDS in our next earnings call. The data with Tuspetinib collected to date have guided us to specific populations that may allow accelerated approval in the near term.

But Tuspetinib's safety profile with its productivity, making the ideal candidate for combination therapy in the front line, addressing a much larger market, and that's ultimately what we're working towards.

While we currently do not have the resources to pursue all of these development and commercialization task for Tuspetinib, we will collect data to help select trial that will provide the fastest accrual, clear signals and earliest approvals in the most interesting -- that would be of great interest to most potential partners. Having said that, as Dr.

Rice mentioned earlier, we are in discussions with a number of potential partners because Tuspetinib looks like a large biotech or large pharma drug that maybe be owner capacity as a small biotech to fully exploit its capabilities and market potential.

Therefore, we may adjust our patient accruals to meet the needs of Aptose, meet the needs of regulatory agencies and to meet the needs of potential partners.

So to summarize our clinical plans, Tuspetinib with its proven breadth of activity and superior safety profile ultimately may address the most sizable market in AML that we are developing in this section.

First, the emerging data are guiding us to a registrational trial for accelerated approval with the TUS/VEN doublet and to target AML patients who have failed Venetoclax therapy, a population with great unmet medical need.

We expect the data from this trial will inform additional registrational trials for use in triple combinations in front line therapies and finally, for use in the maintenance therapy setting as well. So let me sum up. Because APTIVATE is an open label trial, we will report data when available at appropriate forms.

As we discussed in our last call, we plan to present an expanded clinical data set, particularly from the TUS/VEN doublet arm at the European School of Hematology meeting, or ESH in October and even more data than to be updated at the ASH meeting in December. In November, during our earnings call, we will provide additional interim updates.

And then in December around the ASH annual meeting, we plan to present more mature clinical data with Tuspetinib. Also, during the fourth quarter of this year, we expect to provide additional color around the registrational plans with Tuspetinib.

Plus, as Bill mentioned earlier, we may release material findings at any time during these conferences and earnings calls. So we have a lot to look forward to in the coming months. Stay tuned. Now I'd like to turn the call over to our CFO, Fletcher Payne, for an update on our financial status.

Fletcher?.

Thanks, Raf. Good afternoon, all. I'd like to start by noting that in addition to our comments in this call, additional information may be found in today's press release and the 10-Q filed with the SEC.

As Bill mentioned, during the quarter, we entered into a $25 million committed equity facility with Keystone Capital, which provides Aptose with the right to sell and issue up to 25 million of its common shares over 24 months to Keystone.

Additionally, we have $7 million binding term sheet that we signed with Hanmi Pharmaceutical, which will help Aptose continue to invest in our clinical programs, we are grateful for the support of Hanmi and Keystone for their confidence in Aptose.

The Hanmi term sheet outlines an investment of up to $7 million or 19.99% ownership interest in Aptose in 2 tranches. We anticipate the first tranche of $3 million will be closed by the end of August.

The second tranche of up to $4 million or a maximum of 19.99% ownership is contingent on meeting certain to substantive milestones, which are expected to be achieved by year-end. The use of the proceeds we used to fund the Tuspetinib program.

The investment is also conditioned on customary closing conditions and meeting the requirements and approvals of the TSX and NASDAQ. Now let's review the second quarter of 2023 financials. We continue our disciplined financial management of our operations and prioritization of our investments in the Tuspetinib clinical program.

We ended the second quarter of 2023 with approximately $23.3 million in cash, cash equivalents and investments, a decrease of $12.4 million as compared to March 31, 2023.

The $1.2 million increase in our cash burn is related to spending on the APTIVATE study, to supplement clinical materials, a decrease in our accounts payable and partially offset by certain accrued liabilities. On a cumulative basis, through June 30, 2023, the company has raised a total of $1.2 million of gross proceeds from our 2022 ATM facility.

Based on current operations, the company expects that cash on hand, our available capital will provide the company with sufficient resources to fund planned company operations, including research and development through March of 2024.

During the quarter, the net loss was approximately $14.1 million, translating into a $2.27 per share loss compared to $10.6 million loss from the same period in 2022. I will note all references to share prices and numbers of shares per share have been presented in reflection of the 1 for 15 reverse stock splits completed on June 6, 2023.

As identified in the income statement, we had no revenues during the first six months of 2023. Research and development expenses were approximately $10.6 million for the quarter compared to $7.3 million during the same quarter of 2022.

Program costs for Tuspetinib were $8.1 million for the three months ended June 30, 2023, compared to $2.3 million for the three months ended June 30, 2022.

The higher program costs for Tuspetinib in the current period represent the enrollment of patients in our APTIVATE clinical trial, our clinical materials, healthy volunteer trial and other related expenses.

The program cost for Luxeptinib were $706,000 for the three months ended June 30, 2023, and decreased by approximately $1.7 million compared to $2.4 million for the three months ended June 30, 2022, primarily due to lower manufacturing costs as a result of the current G3 formulation requiring less API than prior formulation.

G&A expenses were $3.9 million for the quarter compared to $3.3 million from the same quarter of 2022. The increase was primarily due to increased salaries expense and higher professional fees. As of August 10, 2023, Aptose had 6,519,201 common shares outstanding. Now let's turn it back to Dr. Rice..

Thank you, Fletcher. Now we will open the call for questions. And please feel free to pose a question to any of us. Operator, if you could, please introduce the questions..

[Operator Instructions] Your first question comes from Edward Tenthoff of Piper Sandler..

Hey, thank you, again. Thanks for taking my questions. And looking forward to more data later this year. When it comes to the recent Hanmi investment. I'm sorry, Fletcher, I couldn't quite hear what you said at the end. The second tranche is $4 million. The first tranche is $3 million.

Is there a specific number of shares that go with each of those?.

Okay. Thanks very much for the call. So the proposed term sheet does anticipate selling common stock in the first tranche of $3 million. It's a structure that has been proposed in the binding term sheet is made up by two look-back features, looking at different averages over two different time periods and including a slight premium on top of that.

More details will be provided when we closed the first tranche of that..

[Inaudible] occur in October?.

That will occur in August of this year..

August. Sorry, but yes..

The $4 million tranche up to 19.99% is also anticipated to be some form of equity, including common stock. We also have the flexibility to negotiate a structure that will be acceptable to both parties if we reach 19.99% and want to invest above that level..

In the two tranches? Yes..

So there is flexibility in that fourth tranche, and it's anticipating that potentially the company will have additional issuances between now and that time frame. And so it's uncertain at the exact price point that those shares would be issued for..

Your next question comes from Matthew Biegler of Oppenheimer..

Hey, guys. Thanks for the update here. On the combo, do you have any literature on either like a delayed Venetoclax response or resensitization to Venetoclax? I guess, what I'm asking is how confident are we that Tuspetinib was what was driving the activity of the combination, which looks really encouraging. Thanks..

Raf, would you like to take that one, and then I can jump in for more..

Sure. Yes, Matt, thanks for that question. It's a good question. I think if you look back at the monotherapy trials of Venetoclax in the relapsed/refractory setting, even patients that were naive to Venetoclax, the response rates really weren't very impressive.

The single therapy Venetoclax studies even increase the dose up to 800 milligrams twice what we give in combination with Tuspetinib and so a very modest response rates and very short duration of response. So I don't think the Venetoclax by itself is doing a heck of a lot.

However, it may be the case that with a different partner switching from HMA then to Tuspetinib/Venetoclax, rekindles the sensitivity to Venetoclax. That is one possible interpretation for the activity that we're seeing.

And by targeting a different mechanism of action in the combination that we're using compared to what the patients have been exposed to before. So we don't believe that it is the Venetoclax by itself, it's really doing something here. We do believe that is something that's in combination with Tuspetinib.

Many of these patients are coming right off of HMA than prior. And many patients have had it a long time before and then add other therapies in between. When we think about a registrational trial, we are going to be focusing more in that former setting, patients coming directly from that prior therapy to our study..

Thanks, Raf. So Matt, you may recall that when Venetoclax originally being tested in AML, it was clear that it didn't have a good single-agent activity. And then when you get to the relapsed/refractory patient population, it's even less effective as a monotherapy. And we hear that from all the KOLs. There are very few publications on this.

But it's clear that the Venetoclax alone in this population is just not very effective at all. So we're thrilled to see that when we combine it with Tuspetinib, we're seeing good response rates..

Your next question comes from Li Watsek of Cantor Fitzgerald..

Hey, thank you for taking our questions. And congrats on the interesting data. A couple for the doublet. Can you just remind us what is the CRc benchmark? It's for patients who are previously treated with Venetoclax. I think you mentioned single digit. Just wanted to confirm that.

And the second is what is the CR and CRh rate for these 10 patients?.

Raf, do you want to get -- I had difficulty hearing. So perhaps you can..

I heard the question, yes, she is asking, that's a good question. So what is the benchmark for patients who have failed HMA then in different settings. And there are a couple of different publications that have come out recently that identify the poor response rate that these patients have after failure of Venetoclax.

In 1 study, it was below 10% and other study 12%. I think on average, the CRc rate, which includes CRi, is probably in the order of 8% to 12%. Not to mention the CRh rate, which unfortunately isn't always broken out in these studies. So we're encouraged by the activity that we've seen in our study to date.

As you'll also note that in several of these studies, they have combined Venetoclax is their agents, their responses initially began as what we call incomplete responses or within complete hematologic recovery and mature over time. So our data right now are not quite as mature. We've only been at this for a couple of months now with the combination.

So we will tell you that we have responses but some of those responses could be maturing further. So we're giving the CRc rate at the moment, and we'll give you more detail as the trial develops..

Okay. And the next question is, I know it's early, but can you comment in terms of durability..

Yes, it is early. I think it's hard to talk about what the overall durability is. I will say that we do have patients that have remained not for many cycles and we have patients that are continuing to be ongoing. So we don't think that this is an instance of people having a response and then 2 weeks later coming out study.

We've certainly seen more durability than that. Ultimately, we'll have to see how durable these responses end up being, but we're hopeful that patients are tolerating the treatment well and we'll be able to stay on for a long time..

And are any of these patients who achieved CRc went on to transplant? And in your current product call, do you allow patients to get back on the drug after transplant?.

Yes. It's still early. So no data to report about stem cell transplant. But as you -- we have had many patients on the monotherapy portion of the arms that we did in the deescalation exploration go on to transplant. We now do include the ability for patients to resume dosing after transplant.

If they meet certain criteria, they have to be in remission for example, and not have any ongoing toxicities in the transplant that might interfere with our treatment. But if they meet those criteria, they would be able to resume dosing with Tuspetinib as a single agent after stem cell transplantation..

Your next question comes from Joseph Pantginis of H.C. Wainwright..

HI. This is Sarah on for Joe. I was wondering if you could maybe frame expectations for ESH in October. I know it's kind of early, but maybe could you speak to what kind of data readouts we could expect? Thank you..

So let me take this one initially. So Sarah, initially, what we're presenting today was what we had planned on presenting at the ESH in October. So we're actually putting this information and data out early. That is because we made the decision earlier this year to begin putting patients on the doublet much earlier than we had anticipated.

It's just everything pointed toward the doublet, so we tried to begin trying to drive patients on as quickly as possible. It's been really brisk. And so the data that we're presenting now was originally what we had planned on presenting at ESH. Having said that, we continue to put place, as Dr.

Bejar mentioned a moment ago, some of the patients that are currently on now, we're hoping to see those patients mature over time. You said very often, when you first put them on the doublet, especially with Venetoclax, you don't get the full count recovery of the normal blood counts initially, and it takes a bit of time for them to recover up.

So we'll be watching for that. In addition, we're putting additional patients on now and over the next couple of months. So our primary data cut will be sometime in September for the final presentation of data at the end of October in ESH but we also provide the preliminary data that we are collecting during September and the early part of October.

So it will be more mature data than where we are now, but it's still going to be an interim data set..

Your next question comes from Soumit Roy of JonesTrading..

Hi, everyone. Congratulations on the progress on the solid data from the Venetoclax combination arm.

Could you give us a little bit color on -- of the 5 responders, like how many were in complete blood recovery, CRi or bone marrow CRs and what were their baseline blast counter?.

So Raf, I can take this initially and then you can jump in. So essentially, we have -- at this point, we have 1 CR, a couple of CRis, and I believe 1 CRP. We don't have any PRs or MLFS. So it's all of a CR type. That's what we call it, the composite CR. In terms of the entry blast counts, I can't recall all of those for the patients.

The physicians have characterized these as complete remissions. We'll continue to collect all the data with these patients, the entry percentage blast in the bone marrow. The recovery of the normal cells in the blood. We'll also have to get additional information on the mutation status of all the patients.

So we get some information like that from the clinic initially, but we have to go back and make sure we source verify everything and do a deeper dive on the mutation, so we fully understand these patients. Dr.

Bejar, did you want add?.

Yes. I just want to correct one thing that you said. In our study, the response criteria that are being used from the start of the study when it was initially initiated by Hanmi, go back to IWT 2003. So in that case, MLFS and CRi are lumped together. So the responses that we have don't mention MLFS specifically because MLFS is part of CRi.

So there are some patients that clearance in blast without count recovery yet, but many patients remain on study. So I don't know what will happen to those patients. They could certainly evolve it to have improved counts in a more mature response but we'll have to wait to see.

I think to answer Sarah's question, I think by the time we get to ESH, we'll have more of that information, and then we'll be able to answer these questions about what has happened to these patients and what kind of responses they had..

Right. That makes sense. Curious if anybody already underwent transplantation or on route to giving undergo stem cell transplantation? And second is the -- in the 50 wild-type population. That's pretty encouraging, 2 out of 3 showing composite CR.

Any plan on somehow focusing more on enrolling these wild-type patients? Or it's going to be as the population distribution will be of the patients?.

No, Soumit. Let me correct you there. We've had 2 out of 3 responders in the FLT3 mutant population that were efficacy valuable and then we've had 3 out of 7 responders in the FLT3 unmutated, 4 out of 9, I am sorry, blanking on the numbers a little bit here, but the 2 out of 3 were the FLT3 mutant population..

Got it. My apologies.

And do you have any color on how many patients are undergoing stem cell transplant? And I missed the last part when you were mentioning about the MDS program, are you going to partner out that part of it or for the bandwidth issue? Or were you talking about something else?.

So it's really too early to discuss transplant in this patient population because even if a patient were intended to go to transplant from the onset, it would take a couple of months to get there. And honestly, the sites don't necessarily share their plans for the patients with this in real time.

We've learned about it often as patients are coming off study to go on transplant in the past or now going in transplant and taking a positive dosing. So we'll have more on that at ESH.

As for the MDS pilot that were discussed, we want -- we're going to do that ourselves and they just include it as the subpopulation within the APTIVATE study, where we can explore the activity in this broader patient indication..

Also for a quick correction. So for FLT3 wild-type patients, it was 3 of 7 for 43% CRc rate. 3 of 7. And the FLT3 wild-type was 2 of 3..

Wait, say that again, Bill..

Well, I'm sorry, FLT3 mutated was 2 of 3. FLT3 wild-type was 3 of 7 and FLT3 new , 2 or 3. Yes..

Clear as mud. Perfect..

Apologies for starting up that confusion but thank you again for taking the question and congratulations..

Your next question comes from Gregory Renza of RBC Capital Markets..

Hi, Bill and team. It's Anish on for Greg. Congrats on the quarter. And thanks for taking my questions. Just a couple for me. As we start to think about the competitive landscape and the recent approval of FLT3 inhibitor, Quizartinib, from Daiichi which have met safety bars from regulators.

How are you thinking about safety bars going forward, precedent and messaging on the differential safety profile of Tuspetinib? And I have a quick follow-up..

Raf, do you want to take that one?.

Sure. Now we're happy to see that QUIZ finally achieved a response rate in an indication got approved. I think the important addition to the [inaudible]. So QUIZ got approved in combination with chemotherapy in the frontline setting. Treating a broader set of patients that were treated in the early midostaurin trials.

However, they do have a REMS system, I think, largely because of the concern about QTc prolongation and we were fortunate not to have that as a toxicity with the spade. We really haven't seen QTc prolongation is something that's related to the drug or some of the other potential issues that have plagued other kinase inhibitors.

So as far as how it's going to affect us, I don't think it will necessarily. I think the QUIZ and TUS/VEN are very different drugs and we would hope that we could be able to treat patients who received QUIZ in the frontline. We've already seen activity both in midostaurin treated patients. So we expect that, that would be the case.

So we welcome it to the landscape, and I don't think it's going to change our approach in relapsed or refractory where QUIZ is not approved..

Great. That makes sense. And lastly, just a quick one. What should investors expect around the coming doublet day package in October at ESH? And what are your objectives with the data disclosure? I appreciate the time and congrats again on the progress..

Right. Thanks. So we covered this a bit a few minutes ago. In terms of what's going to be expected at ESH, it's going to be a continued maturation of the data that we currently have with the patients that are currently on trial to watch these patients to see if they mature towards more mature CRs and recovery of the normal bone marrow.

So we'll watch these patients that are currently on trial. We're also putting additional patients on trial, and we'll be following those over the next couple of months. But as I mentioned, the current data that we're presenting now is what we're expecting to present at ESH.

So we're way ahead of the game already or presentation of the data because we began treating patients earlier this year than expected with the doublet..

I am currently showing no further questions. I will now turn the call back over to Dr. Rice for closing remarks..

Well, thank you for joining us this afternoon. 2023 thus far has been a year of clinical and strategic advances for Aptose and we thank our employees, our investigators and our patients for their help in this important work.

Our clinical team has been key in getting the APTIVATE trial up and running so efficiently with multiple global clinical sites on board and so I want to recognize them for their execution.

We appreciate the support of our shareholders who have been with us through the clinical development time lines and the analysts who recognize the potential of a drug that has shown such broad activity in difficult-to-treat AML patients, yet maintains a superior safety profile. We look forward to keeping you updated on our progress.

And finally, I'll remind you that we will be in New York to participate in investor conferences during September and perhaps we can see you there. With that, I want to thank you, and have a good evening..

Thank you. Ladies and gentlemen, that concludes today's conference. You may now all disconnect. And have a wonderful day..